And so the badly thought out experiment to supply Libyan rebels with a central bank, to be used to fund an “alternative” fuel industry comes to a prompt and fiery end. Reuters reports that “Libyan government forces destroyed four fuel storage tanks and set several others ablaze in rebel-held Misrata, dealing a blow to the port city’s ability to withstand a government siege, rebels said on Saturday.” Not surprisingly this fits in perfectly with the assumption first postulated by Zero Hedge that Gaddafi will destroy his entire oil infrastructure before letting it fall into “enemy” hands. This likely marks the end of the Libyan rebellion and will force NATO to launch a land offensive or suffer a crushing blow to its already shaky reputation as globocop, especially now that the US is in theory at least, out of the air campaign against Gaddafi. Which means that the boots on the ground are soon coming. Alas, it will not be the marines in the Kearsarge. As the below naval update map indicates, the Kearsarge has been relieved and now has left the theater of operations, however replaced with LHD 5 Bataan.

More from Reuters:

Misrata, the last remaining city in the west under rebel control, has been under siege for more than two months and has witnessed some of the war’s fiercest fighting.

Rebels gave varying accounts of the bombardment but said it hit fuel used for export as well as domestic consumption.

“Four (fuel) tanks were totally destroyed and a huge fire erupted which spread now to the other four. We cannot extinguish it because we do not have the right tools,” rebel spokesman Ahmed Hassan told Reuters.

“Now the city will face a major problem. Those were the only sources of fuel for the city. These tanks could have kept the city for three months with enough fuel,” he said by telephone.

NATO coalition aircraft have been bombing Libyan government military targets and enforcing a no-fly zone under a U.N. resolution. Western and Arab countries this week agreed to provide rebels with millions of dollars in non-military aid to help them keep services and the economy running.

Rebels have long been demanding more heavy weapons to take on the Libyan leader’s better-armed and trained forces.

The head of the rebel forces in eastern Libya retracted an assertion by a rebel spokesman that Italy had agreed to supply them with weapons to help in their fight to oust Gaddafi.

“We have not received any weapons, not from Italy nor from any other country,” Abdel Fattah Younes told al Jazeera television. “Maybe one of the brothers failed to express himself properly … we apologise to Italy on behalf of the brothers in the National Council.”

A spokesman for the rebels’ Transitional National Council had told a news conference in Benghazi earlier in the day that weapons would be provided to the insurgents soon.

In Rome, a Foreign Ministry spokesman said no such agreement had been reached.

Italy has backed the rebels, formally recognising the transitional council as the only legitimate representatives of the country, but it is unlikely it would go further than other countries in the anti-Gaddafi coalition.

In the meantime the Libyan civil war continues to get “accidentally” hit Tunisian cities:

The Tunisian town of Dehiba has been hit repeatedly by stray shells in recent weeks, and on Saturday Tunisia condemned the “extremely dangerous” shelling and said it would take all necessary measures to protect its sovereignty.

The Libyan government denied targeting Tunisian soil deliberately.

“We said this (shelling) was an error and we have apologised that this took place and have asked the military forces to ensure this doesn’t happen again,” Libyan Prime Minister Al-Baghdadi Ali al-Mahmoudi told a news conference in Tripoli.

The battle is over the Dehiba-Wazzin border crossing, whose control gives the rebels a road from the outside world into strongholds in the Western Mountains region. Gaddafi’s forces control a far bigger crossing to the north.

And while NATO ponders how to best break to the world that it has failed in Phase 1 of the Libyan offensive, it appears that 1.6 million of barrels of oil will be out of the supply system for a long time. Furthermore, with developments in Syria and Yemen getting worse by the day, we are confident that geopolitical worries will once again trump margin hikes, and crude will promptly return in the triple digits within a week.